Affordability

Households' Income, Regulations, and Land Supply (Part I)

Governments try to formulate housing policies that will provide socially acceptable housing standards at an affordable price for all. However, governments may exacerbate the high cost of housing in a city by limiting the supply of housing through regulations and underinvesting in urban expansion. In their search for solutions, urban managers often ignore that households’ housing choice is driven by a combination of three attributes: floor area, location, and price of land and construction per square meter. Because floor area and construction quality are the most visible of the three attributes, planners tend to concentrate on improving the design and increasing the area of dwellings when drafting a housing policy. They tend to ignore housing location and its corollary: access to city’s labor markets. When low housing standards are largely due to poverty, ignoring location to provide larger homes might devastate the very population the policy is supposed to help.